Indian airline buys domestic rival for £171m

Naresh Goyal, the London-based travel agent turned airline boss, yesterday bought his nearest rival, Air Sahara, for 14.5bn rupees (£171m) to secure his position as the dominant player in India's fast-growing aviation market.

Mr Goyal, an Indian expatriate, has sealed a deal that collapsed when first attempted a year ago amid some rancour. His airline, Jet Airways, had offered £265m in January 2006 for its smaller competitor but later haggled over the price, leading to a fallout. Both managements now say they have reached an "amicable" sale.

Mr Goyal, whose personal wealth is estimated at more than £700m, told reporters the deal was "definitely going to be good for the shareholders".

Jet built its reputation on bringing world-class standards to Indian aviation since the sector was liberalised a decade ago. However, last year investors dumped Jet stock on the advice of analysts who argued the burden of turning around Sahara was too great.

Sahara is considered a vanity product, kept afloat by the ambitions of its billionaire Indian owner Subroto Roy. Yesterday analysts were still advising caution and said Jet's decision was motivated by the fact it faced up to £60m in penalties if it did not buy Sahara.

Under the deal, Jet will pay more than £100m this month and the rest in instalments. The new airline will control almost a third of India's domestic market.